SIPP - The Best Route to Freedom
The sole purpose of any pension scheme is to provide
retirement and related benefits for its members. In this regard
a Self Invested Personal Pension (SIPP) is no different to any
other pension scheme. SIPP was given the "green light" in Nigel
Lawson's 1989 budget speech when he said, "I propose to make it
easier for people in personal pensions to manage their own
investments."
A 'SIPP' is a type of a Personal Pension which provides
you a tax efficient way in which you can invest funds to build a
regular income and a tax free lump sum amount when you reach an
age above 50. It provides you with extreme freedom to divert
your savings in any form of investments.
A member can take all or any part of his funds at any time
between the ages of 50 to 75. He need not give up work if he
does not wish to. The pension he receives will be taxed as
earned income. But if he is unable to work due to various
reasons such as health etc he may withdraw out the money before
50.
SIPP is different from traditional pension plans as it
provides more control and flexibility to individuals to make any
type of investments including cash, stocks, funds, bonds or even
in commercial properties. SIPP also provides us with the freedom
to transfer any form of asset held within a personal pension or
an occupational pension, into a SIPP.
SIPP offers the best planning and tax reduction opportunities
like Income tax, Capital Gains tax and Inheritance Tax.
Tax relief is available on your contributions to your SIPP at
the highest tax rate you pay. SIPP's key benefit is that a
quarter of your pension fund can be taken as tax free lump sum
and the remaining pension you receive from your fund is received
after tax deductions.
No Capital Gains Tax is payable by you on any gains made by
your SIPP. In case of your death before retirement there is no
Inheritance tax to be paid on the assets distributed from the
SIPP in the form of a lump sum within the two years of
your date of demise.